Waymo v. Uber: How Damaging is the Stroz Friedberg Due Diligence Report?

One of the most hotly contested disputes in the Waymo v. Uber trade secrets lawsuit has centered around the disclosure of a forensic consultant’s due diligence report that Uber commissioned after learning that its former star engineer, Anthony Levandowski, had taken confidential files from his former employer Waymo. Uber and Levandowski had vigorously resisted the production of the report but the court order directing its production was recently affirmed by the U.S. Court of Appeals for the Federal Circuit. That due diligence report, which was prepared by the reputable forensics firm Stroz Friedberg, has now been made public. As I discuss below, the report is a jarring document and it has information that may be damaging to both sides. However, its most significant contribution to the lawsuit may be the fact that Uber’s own consultant (Stroz Friedberg) was providing multiple red flags to Uber that it was going to pay $680 million to someone that Stroz Friedberg suspected had lied, destroyed key documents and orchestrated efforts with other former Waymo employees to frustrate its investigation. Waymo is not unscathed by the report either, as it is evident that substantial amounts of highly confidential information made its way out the door, calling into question the safeguards Waymo had in place to protect trade secrets it is now valuing at over $1.8 billion. A copy of the due diligence report can be found here.

Background: For those looking for more on this case, you can review my past posts here and here. Like many trade secret cases, which are highly dependent on circumstantial evidence, the timeline is critical to understanding this report. Levandowski left Waymo on January 26, 2016, and began working with Uber about a deal shortly after that. According to the report, “a few weeks after his departure” (one of the few places that there is any vagueness in this meticulous report, and an ambiguity no doubt from Levandowski himself) Levandowski discovered some old Waymo equipment in his garage and that he also “possessed Google proprietary information on his personal Drobo 5D in a closet in his house.” Levandowski admitted that the disks included “source code, design files, laser files, engineering documents, and software related to Google self-driving cars.”

Destruction? Levandowski claimed that he had created the disks in the ordinary course of business while at Google, and that as soon as he discovered that he had the disks, he had notified his attorney and then told Uber at a meeting on March 11, 2016. Cameron Poetzscher, Uber’s head of corporate development, instructed Levandowski to preserve the disks, but former Uber CEO Travis Kalanick “wanted nothing to do with the disks” and told him to “do what he needed to do.” On the same day, Levandowski wrote in a deleted iMessage to an unknown recipient: “I’ll clean that shit out.” Despite the instruction from Poetzscher, Levandowski told investigators that he took the disks to a shredding facility in Oakland after his meeting with Uber, paying cash. However, when Stroz Friedberg later visited the facility to verify Levandowski’s account, none of the employees could identify Levandowski (although there did appear to be a receipt for the destruction of 5 disks paid in cash with an unrecognizable signature). In other words, Stroz Friedberg was never able to verify that the 5 disks were actually destroyed.

Obstruction? The report also suggests that the former Waymo employees obstructed their investigation, noting that “there was an effort by [Lior] Ron, Levankowki, and their Ottomotto colleagues to delete text messages in real time” during the investigation. For example, Stroz Friedberg noted it could not examine the chief operating engineer Colin Sebern’s iPhone because it was encrypted. “During his interview, Sebern provided Stroz Friedberg with a list of possible passwords, but none of them worked.” When it examined Sebern’s MacBook Pro, it found that “interestingly, 57 gigabytes of additional free space” became available right before his interview. Stroz Friedberg also concluded that Lior Ron had deleted a file labeled “Chauffer win plan.docx” from his computer shortly before his interview, a move that Stroz drily described as “poor judgment given the protocol in place.” (Chauffeur was the name of Waymo’s self-driving car project which Ron, Levandowski, and others at Ottomotto previously worked on.)

Stroz Friedberg’s skepticism is palpable throughout the report. Here are some of the other high points:

Levandowski and his team repeatedly deleted information despite instructions not to do so. On March 1, Levandowski told an unknown recipient to “delete the iMessages every night” and on the very same day he was told to preserve the 5 disks, he told one of his key lieutenants (Ron Lior) “[m]ake sure you delete all the messages tonight on both your PC and iPhone.” In fact, it appeared that some of that deletion activity took place in the very building where Levandowski was meeting with the investigators and in another instance, minutes before a meeting with Stroz Friedberg. The multiple and ongoing efforts by Levandowski and his team to delete information is simply shocking.

Stroz Friedberg believed that Levandowski lied to it during the investigation. For example, after Levandwoski said he “believed there were no or few Google e-mails on his laptop,” Stroz Friedberg discovered 50,000 work emails that were downloaded on to his computer. As a result, Stroz Friedberg wrote “[i]t is difficult to believe that Levandowski was not, prior to his interview, fully aware of the extent of the data that he had retained.” It also seemed skeptical of his story about the disposal of the 5 disks at the shredding facility in Oakland.

Not surprisingly, it does not appear that Levandowski disclosed the thumb drive that contained the 14,000 files that he downloaded on December 11, 2015 (it is possible that it may be tied to the 5 disks but it is difficult to connect from the face of the report). However, it appears that Levandowski’s December 14, 2015 download (which was mentioned in Judge Alsup’s preliminary injunction opinion as having taken 8 hours to transfer to a thumb drive) may have actually led to the downloading of even moreinformation. According to Stroz Friedberg, 24,000 files were located on Levandowski’s MacBook on December 14, which matches up with the December 14 download date in Judge Alsup’s opinion. Levandowski subsequently deleted these files, although it is unclear when.

Levandowski admitted to actively soliciting and recruiting Waymo colleagues while he was still employed at Waymo, hosting at least 2 get-togethers at his home to pitch his new venture. These efforts paid off, as of the date of the Aug. 5, 2016 date of the report, Ottomotto had 16 former Waymo employees.

For those interested in reading more about the due diligence report’s contents, I would recommend Aarian Marshall’s excellent summary for Wired and Sarah Jeong’s fine summary for The Verve.

So what does all of this mean? It is pretty clear why Levandowski fought so hard to prevent the disclosure of the due diligence report. He comes off as unscrupulous and untrustworthy, as the excerpts above illustrate.

Uber also does not fare very well: although Stroz Friedberg says it did not detect any direct evidence of the transfer of Waymo confidential information Levandowki’s Ottomotto, it is clear that significant amounts of confidential information made there way out the door with Levandowski and other Waymo employees. Stroz Friedberg also found significant amounts of source code (734 source code files with Levandowski and another 174,000 source code files with another engineer) that made its way to the former Waymo employees’ devices (Stroz Friedberg was careful to say it could not discern whether it was Waymo source code or not but the circumstances are certainly suspicious). Despite the many disclosures in the report, Uber paid $680 million to Levandowski and also agreed to indemnify him for potential trade secret misappropriation claims by Waymo (for an excellent analysis of that indemnity and what it has ultimately cost Uber, see Jim Pooley’s superb article in IP Watchdog). Taken together, this could be compelling circumstantial evidence that Uber was prepared to look the other way if Levandowski and his team used Waymo’s trade secrets.

Finally, Waymo’s trade secret protection safeguards may be subject to attack. For what Waymo now contends was a multi-billion-dollar groundbreaking technology, there were significant amounts of confidential information that were not recovered by Waymo before its employees left. It appears that Waymo employees were allowed to exchange this information over their personal devices; according to Levandowki, he stored Waymo documents on his personal laptop, phone and various hard drives and thumb drives. In addition, Levandowski and his colleagues frequently used file-sharing sites such as Dropbox and Google Docs to share Waymo documents, effectively rendering compete retrieval and recovery of that information impossible.

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